A THEORETICAL FRAMEWORK FOR MODELING SALES-SERVICE RELATIONSHIPS IN THE TRANSPORTATION INDUSTRY

This paper presents a theoretical framework for estimating the functio nal form of the relationship between sales and service performance for transportation providers. We introduce a method of improving model pe rformance by utilizing a concept of human behavior that has never been incorporated into the models of sales-service relationships. This con cept, called the loss aversion property, claims that customers (shippe rs) react more strongly when they experience service performance below their reference point (expectation) than when they experience service performance above their reference point. Using this concept, we posit that a one unit decrease in service quality from the customer's refer ence point would decrease a carrier's sales more than an equivalent-si zed increase in service quality would increase sales. To incorporate a n asymmetric pattern of the sales-service relationship, we develop a m odel that makes a key distinction between sales response to service in crease and to service decrease. The model is demonstrated using hypoth etical data. The discussion addresses multiple service quality measure s as well as data implementation issues. (C) 1998 Elsevier Science Ltd . All rights reserved.